TAX LAW & PRACTICE(CUAC
212)
PROG: BSCAC
LEVEL: 2.1
YEAR : 2021
CHAPTER 11: TAXATION OF PARTNERS
11.1 Introduction
Formed by at least 2 and not more than 20 people.
Not a legal persona.
Not a taxpayer on its own.
CHAPTER 11: TAXATION OF PARTNERS
11.1 Introduction
Partners are taxed on their share of partnership profits.
The income is taxed at a rate of 24.72%.
CHAPTER 11: TAXATION OF PARTNERS
11.2 Accrual of Partnership Income
Accrues to partners;
In their profit/loss sharing ratios;
On the accounting date.
11.3 Source of partnership income
Where the partner has rendered his services.
CHAPTER 11: TAXATION OF PARTNERS
11.4 Returns and assessments
To submit a joint return.
Supported by accounts.
Separate assessments on each partner.
CHAPTER 11: TAXATION OF PARTNERS
11.4.1 Death of a partner
Prepare a return in order to show the results of the
partnership;
For the period from the last accounting date to the date
of the death of the partner.
Not applicable if the contract provides for continuity.
CHAPTER 11: TAXATION OF PARTNERS
11.4.1 Calculation of partners’ tax liability
Calculate joint partnership taxable income.
Share the joint taxable income to the partners in their
profit/loss sharing ratios.
Tax partners at 24.72%.
CHAPTER 11: TAXATION OF PARTNERS
11.5 Allowable deductions
Expenses that are incurred by the partnership for the
benefit of a partner;
Allow deduction-Joint taxable income.
Gross Income-benefiting partner.
CHAPTER 11: TAXATION OF PARTNERS
11.5 Allowable Deductions
11.5.1 Passage Benefits
Allowable deduction-Joint taxable income.
Gross income-benefiting partner.
However, if it’s a partner’s business trip;
Where he uses the opportunity to take a holiday after
the business;
Benefit is not gross income in the hands of the partner.
CHAPTER 11: TAXATION OF PARTNERS
11.5.2 Attendance at trade conventions
(Section 15(2)(w)
A maximum of ZWL$25,000 per partner, for one
attendance per annum.
11.5.3 Ex-gratia payments to a former partner or
dependent of a former partner S15(2)(q)
Maximum of ZWL$2,000 per partner.
Max ZWL$2,000 per dependant(s) of one former partner.
Tax full amount in the hands of the partner.
CHAPTER 11: TAXATION OF PARTNERS
11.5.4 Medical Aid Contribution
Medical aid contributions made by partnership on
behalf of partners;
Allowable deductions-Joint Taxable Income.
Gross Income-Benefiting partner.
Benefiting partner claim credit.
CHAPTER 11: TAXATION OF PARTNERS
11.5.5 Subscriptions
Sport, professional or trade association;
Paid by a partnership on behalf of the partner;
Allowable deduction-Joint taxable income.
Gross income-benefiting partner.
Partner claim a deduction for trade or profession.
CHAPTER 11: TAXATION OF PARTNERS
11.5.6 Private expenditure
Incurred by a partner and paid by the partnership;
Allowable deduction-Joint taxable Income
Gross Income benefiting Partner.
11.5.7 Insurance premiums
Business assets; Allowable deduction-Joint taxable
income.
No gross income to partners.
CHAPTER 11: TAXATION OF PARTNERS
11.5.7.1 Joint survivorship policy
Not an allowable deduction: Joint taxable income
Not gross income-partners covered.
CHAPTER 11: TAXATION OF PARTNERS
11.5.7.2 Separate life policies for partners
Where a partnership pays premiums for separate
policies covering the partners,
Partner is a beneficiary.
Allowable Deduction: Joint taxable income.
Gross income: benefiting partner.
CHAPTER 11: TAXATION OF PARTNERS
11.5.7.2 Separate life policies for partners
The partnership is the beneficiary,
No allowable deduction-Joint taxable income.
Not Gross Income-partners.
CHAPTER 11: TAXATION OF PARTNERS
Ceded Policies
Policies which were originally taken by partners for
their benefit but;
Have been surrendered to the partnership.
No allowable deduction-Joint taxable income.
Not Gross income-partners.
CHAPTER 11: TAXATION OF PARTNERS
Motor Vehicle Use
Bought by partnership
Used by partner for both private and business.
Calculate and apportion capital allowance; business and
private.
Portion for business: Allowable deduction-Joint taxable
Portion for private: Gross Income, benefiting partner.
CHAPTER 11: TAXATION OF PARTNERS
11.5.8 Summary of allowable deductions
• EXPENDITURE PARTNERSHIP PARTNER
• 1) Partner’s salary Allowable Taxable
• 2) Joint life policies Not allowable Not taxable
• 3) Partner’s life policy – partnership is the beneficiary.
Not allowable Not taxable
• 4) Partner’s life policy – partner is the beneficiary.
Allowable Taxable
• 5) Partner’s life policy – ceded to the partnership.
Not allowable Not taxable
6) Partners interest on Capital Allowable Taxable
7) Drawings Not allowable Not Taxable
CHAPTER 11: TAXATION OF PARTNERS
11.5.8 Summary of allowable deductions
• EXPENDITURE PARTNERSHIP PARTNER
• 8) Interest on drawings Taxable Non deductible
• 9) Rents payable to a partner Allowable Taxable
• 10) Sports subscriptions Allowable Taxable
• 11)Pension/RAF contribution Allowable Taxable
• Partner can claim deduction up to ZWL$54,000.
12. Attendance at trade mission or convention (Section 15(2)(w)
Allowable (max $25,000p/p) Not Taxable
